Surrounded by questions, AmeriCredit fulfills promise with new deal

As its stock price hovers below the price of a cup of coffee at Starbucks, AmeriCredit Corp. is on the road with its first auto-loan securitization of the year, sources said. Amid many questions centered on the troubled lender's viability, the issuer has reportedly secured a surety from a monoline it has yet to do business with, insulating investors from headline risk, as well as further diversifying its monoline exposure.

This deal comes on the heels of unilateral support from the bank research community during the recent ABS conferences held in Arizona, where an entire panel agreed that - given monoline backing - AmeriCredit could successfully price a deal. Recent headlines have most ABS investors expecting spreads to come cheap for AMCAR 2003-A even though demand for auto-loan transactions is currently strong due to a lack of supply in the first month-and-a-half of 2003.

Judging by the $2.51 per share close on Thursday, down from over $40 in May 2002 and over $60 in August 2001, the equity markets clearly feel AmeriCredit is headed towards bankruptcy.

"AmeriCredit is by no means out of the woods," commented an investor who will meet with the issuer this week. "But they have made pretty coherent plans to deal with this. I think they understand that, at least for the next two years, AmeriCredit has cut out FSA from its funding plans, and most of us are full-up on FSA-wrapped auto paper."

Underwriters Credit Suisse First Boston and Deutsche Bank Securities have won the joint mandate and are taking turns shopping the story to The Street, as the company plans its ascension back to financial stability. Official premarketing and the dissemination of price guidance is expected the first week in March, investors said.

Using its third monoline insurer, speculated but not confirmed to be XL Capital, ACF further diversifies its exposure to the muscle of a single insurer and, by convincing a new surety that it won't have to write a check on AmeriCredit's behalf, further buttresses the market sentiment surrounding AmeriCredit. AmeriCredit also the majority of its transactions wrapped by FSA and one by MBIA.

As this transaction has yet to settle, or even hit the market, for that matter, all parties refused to comment.

Part of the monoline diversification includes a calculated move away from the cross-collateralized reserve accounts between the various trusts written into its surety agreement with FSA - something included in all FSA-wrapped auto ABS. Sources said that AmeriCredit would return to FSA only under the stipulation that these reserves remain trust-specific, which is highly unlikely.

The only comparable names to hit the market so far this year have been Onyx Acceptance and WFS Financial (Onyx XLCA wrapped; WFS senior/subordinate), each of which saw strong demand in the primary market, despite the general malaise for non-prime auto-loan collateral. The strong execution of last month's Onyx deal - led by CSFB - sparked speculation that CSFB lined up XLCA as the guarantor. "CSFB has shown, with the Onyx transaction, that they know where to place sub-prime auto paper wrapped by XL," said a banker who unsuccessfully bid for the mandate.

Copyright 2003 Thomson Media Inc. All Rights Reserved.

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